Foreign direct investment is an investment made by a foreign individual or company in productive capacity of another country. It is the movement of capital across national frontiers in a way that grants the investors control over the acquired asset.

The parent company starts their business either in the form of a partner, or to make an investment in a company in the host country. There are so many reasons behind the investment like cheaper labour in the country, special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff-free access to the markets of the country or the region.

As the third – largest economy in the world in PPP terms, India is preferred destination for foreign direct investment (FDI). India’s recently liberalized FDI policy permits up to 100% FDI stake in ventures. Industrial policy reforms have substantially reduced industrial licensing requirements, removed restrictions on expansion and facilitated easy access to foreign technology and FDI.